Conditions for the UK’s small and medium-sized (SME) businesses stabilised over the past quarter, according to the latest CBI Quarterly SME trends survey, after deteriorating in the previous quarter.
LONDON, 05-May-2016 — /EuropaWire/ — The survey of 441 firms reported that total new orders and new domestic orders edged up slightly in the three months to April, while export orders fell again.
But optimism about demand for exports over the year ahead also rose for the second quarter, with SMEs expressing greater confidence than larger firms.
Meanwhile, output was flat among small and medium-sized manufacturers, in line with the performance of the rest of the manufacturing sector, following a quarter in which they outperformed the sector as a whole. Expectations for the quarter ahead remained strong.
Against this backdrop, investment intentions strengthened, with replacement and efficiency among the primary drivers of investment, while hiring intentions remain firm. However, concerns about skills shortages have picked up as a potential drag on output.
Rain Newton-Smith, CBI Director for Economics, said:
“Higher spending on training is often a sign that skills shortages are biting again. This further underlines the need for business and government to work together in the coming months and make sure we get the design of the apprenticeship levy right, so it can deliver the quality skills training that firms need.
“While the depreciation of the Pound since mid-2015 will be welcomed by exporters, the Government could and should do more to help by establishing an exports commission that can look at the challenges and opportunities for exporters more closely.”
Key findings – three months to April
- 23% of small & medium sized enterprise (SME) manufacturers said they were more optimistic, while 18% said they were less optimistic, giving a balance of -+5%
- 26% said their volume of output was up, and 25% said it was down, giving a balance of +1%. Companies expect output to increase in the next quarter (+17%)
- 30% said their domestic orders were up, while 24% said they were down, giving a balance of +5%. Firms expect a slight strengthening in orders growth next quarter (+7%)
- 17% said export orders rose over the past three months, 24% said they fell, leaving a balance of -8%, a slightly faster fall than in the previous quarter (-4%). Firms anticipate export orders to grow over the next three months (+23%)
- Compared with three months earlier, firms were more optimistic about their exports prospects for the year ahead (+11%), the second consecutive quarter of improving sentiment (+13% in the three months to January)
- The proportion of SME manufacturers citing concerns about political and economic conditions abroad as likely to limit export orders (32%) was broadly unchanged compared to the last quarter (31%), but remains above its long-run average (+22%)
- Average export prices fell in the three months to April (-11%), but at a slightly slower pace than in the previous quarter (-25%). Export prices are expected to be broadly stable in the next quarter (-2%)
- 31% of small and medium-sized manufacturers are employing more people than three months ago, and 16% less – leaving a balance of +15%
- Plans for capital spending on plant and machinery in the year ahead (+5%) strengthened somewhat (-10 in the previous quarter), whereas investment in buildings (-6%) is expected to fall further (-18).
- Meanwhile, investment in product & process innovation is expected to rise at a steady pace (+9%), as is spending on training & retraining (+26%) The latter balance remains well above the survey long-run average (+13%).
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